Magazine article Rural Cooperatives

Innovation a Necessity, Not a Choice, for 21st Century Co-Ops

Magazine article Rural Cooperatives

Innovation a Necessity, Not a Choice, for 21st Century Co-Ops

Article excerpt

Most of the business innovation occurring today is in response to market pressure, according to Chris Peterson, a professor at Michigan State University. Co-ops, like their competitors, are being "forced" to innovate. In order to remain competitive, Peterson warns, co-ops should be implementing innovative ideas constantly. Florida's Nat-ural Growers is one cooperative that has clearly heeded this counsel.

Citrus co-op competes with beverage giants

About 1950, the chairman of Florida's Natural said: "It is most discouraging to do everything possible to maintain prices that will bring decent returns to our growers and then have these prices made meaningless by ruthless cuts of competitors." If anything, this situation is even more acute today.

Florida's Natural is pitted against the two biggest names in orange juice: Tropicana, owned by Pepsi, and Minute Maid, owned by Coca-Cola. As a result, the co-op faces continuous cut-throat competition while trying to maintain a high return for its members. According to Walter Lincer, vice president of sales and marketing at Florida's Natural, this is nothing new. As manufacturers of a retail product, Florida's Natural has always faced a challenging environment.

Florida's Natural has constantly revised and adapted its marketing strategy in an attempt to gain and keep customers. The acquisition of the Tropicana brand by Pepsi and Minute Maid by Coke was a "wake-up call" to the co-op. Suddenly, the relatively small co-op had to figure out how to compete with the deep pockets of the two giant soft-drink companies.

The mid-1990s brought increased retail consolidation and the co-op worked hard to maintain shrinking shelf space. Sales representation and suppliers have also dwindled in the past 20 years and the farmer's return on the retail food dollar has also declined sharply.

Florida's Natural decided to take advantage of its unique grower-owned status, a distinction that companies such as Pepsi and Coca-Cola can't claim. In 1987, it launched the co-op's first branded premium product: Fresh 'n' Natural orange juice.

The "grove to the glass" promise of Florida's Natural is what Lincer believes has made the company so successful that grocery stores want to carry its product. He also suggested that if co-ops work together, all would benefit from a stronger position in the market, a theme repeated by many of the conference presenters.

Most important innovation resources are internal

"Innovation happens because you intend it to," Chris Peterson said. "How are you going to innovate?"

Co-ops need to be prepared for innovation. Innovation can occur in products and services, processes and technology., competencies and markets. Echoing the same sentiments as Florida Natural's Lincer, Peterson reminded co-op representatives at the conference that "thereally important innovation resources are internal."

If no resources go into innovation, nothing will come out. He recommended that cooperatives seek advice on innovation from universities, research & development firms, government agencies, trade organizations and consultants.

Cooperative leadership can make or break the business. Mike Toelle and Jim Rainey know this firsthand. Toelle, board chairman of CHS Inc., outlined the co-op's board priorities: professionalism, oversight, vision, accountability and commitment to communication. Although the traditional director roles and responsibilities will always be there, he argued that board members need additional skills and knowledge to "stay the course" in today's business environment. "21st century leadership requires cultivating a visionary, innovative and entrepreneurial mindset," Toelle said.

According to Toelle, the CHS board is always "in the process of learning." Being a board member with CHS cultivates a desire to gain knowledge and skills both in business and professional development. …

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